Mortgage Guide
Extra Repayments Explained
Small extra payments have a surprisingly large impact on your total interest and loan term.
How Extra Repayments Work
When you make an extra repayment above your minimum, the full extra amount goes directly to reducing your outstanding principal. Since interest is calculated as a percentage of your remaining balance, a lower balance means less interest charged each period — and that saving compounds over time.
This effect is called interest-on-interest reduction. Even a modest extra payment early in the loan can save many times its face value in future interest.
Extra $500/Month — Impact at $640,000 / 6.5%
Years saved
~6.8 years
Interest saved
~$142,000
New loan term
~23.2 years
Indicative estimates. Use the calculator for your exact loan details.
Extra Repayment Comparison
| Extra / month | Years saved | Interest saved |
|---|---|---|
| $200 | ~2.5 yrs | ~$55,000 |
| $500 | ~6.8 yrs | ~$142,000 |
| $1,000 | ~11.6 yrs | ~$218,000 |
| $2,000 | ~17.2 yrs | ~$287,000 |
Tips for Making Extra Repayments
- ✓Start early. Extra repayments in the first 5 years have the greatest compounding effect.
- ✓Use lump sums. Tax refunds or bonuses paid directly into your mortgage can make a big difference.
- ✓Switch to fortnightly. This equals one extra monthly payment per year automatically.
- ✓Check your loan type. Fixed-rate loans may limit extra repayments. Variable-rate loans typically allow unlimited extras.
Calculate your savings
Toggle the Extra Repayments scenario on the Loan Impact Timeline to see exact years and interest saved for your loan.
Try Extra Repayments Simulator